The reason why companies ask their employees to sign non-compete agreements is obvious. They don't want to hire an executive who goes on to steal the contracts and start a company of his or her own. On many levels, it would be unethical for someone to do this, but that would not prevent an unscrupulous business person from taking advantage of the situation. Non-compete agreements are a way for corporations to protect themselves from situations like this.
Let's say you've been managing a pencil factory that has a particular pencil-making process that radically transforms efficiency and profit margins. The strategy is a trade secret that another pencil company could quickly implement to skyrocket profits. If you signed a non-compete, you probably could not go to a new business with this knowledge you acquired.
What is a non-compete exactly?
Non-competes are legal agreements between two separate parties -- usually a business and its employee -- in which the employee agrees not to use trade secrets and other info acquired during his or her employment to engage in business efforts after his or her employment. The non-compete agreement will usually cover a defined time period after the termination of employment.
Non-compete agreements prevent employees from using the information they acquire to give another competitor business advantage through the abuse of trade secrets or other sensitive knowledge. It also prevents them from starting their own company in competition with their employer. Client lists, business organization practices, future products, and marketing strategies may all be categories of information that a company might seek to protect through a non-compete.
I heard you can't enforce non-competes in Texas
In the state of Texas, non-compete agreements have a reputation for being difficult to enforce. That's because the law in Texas seeks fairness to employees, and it seeks to prevent businesses from taking advantage of employees, who end up unemployed because they can no longer work in their industries.
Don't let the difficulty associated with enforcing a non-compete fool you. A Texas company that carefully drafts its non-compete will be able to enforce the agreement in court. As such, if you left your job and a non-compete agreement is constraining your post-employment actions, be sure to consult with an experienced employment law attorney before you take a risky move that could land you in serious trouble with the law.